Tuesday, January 17, 2012
7:20:28 PM EDT

Oil & Software

by
James Brown

In addition to tonight's new candidate, consider these stocks as possible trading ideas:

YHOO - Yahoo!'s Jerry Yang has resigned from the company and the stock is trading higher after hours. With Yang out of the way it opens the door for YHOO as a potential takeover target. Aggressive traders might want to let the initial spike higher tomorrow settle down and then consider a speculative out of the money call play. The challenge is your time frame. We do not know how soon an acquisition could be announced. It could be months away.

Below are a few bullish candidates worth noting. They're not buys yet but I'd keep them on your radar screen.

Why We Like It:
Shares of this oil stock are consolidating sideways under resistance in the $60.50-61.00 zone. If it breaks out higher it could see a big move. That's because IOC could see a possible short squeeze. The most recent data listed short interest at more than 22% of the 33.4 million share float.

I am suggesting a trigger to buy calls at $61.00 with a stop loss at $57.90. Our target is $66.00. FYI: The Point & Figure chart for IOC is bullish with a long-term $91 target.

Why We Like It:
OPNT is in the application software industry. Shares have not had a good year so far (2012). The stock looks like it's about to breakdown from its current sideways consolidation. I am suggesting a trigger to buy puts at $32.70 with a stop loss at $33.85. Our target is $30.00. More aggressive traders may want to aim lower but I am concerned the 2011 summer lows could be support.

We want to keep our position size small because OPNT has above average short interest at 11.7% of the 14.8 million share float. That raises the risk of a short squeeze should the stock reverse higher.
FYI: The Point & Figure chart for OPNT is bearish with a $20 target.

The spreads are a little wide as well, which is another reason to keep our position size small.